The Office of Tax Simplification (OTS) has suggested that the Government should compel gig economy platforms such as Uber and Deliveroo, to offer to deduct tax from earnings and transfer it to HMRC.

The OTS An increasing number of individuals are finding work through online platforms, usually on a self employed basis whereas in the past they might have been employees whose relatively simple tax affairs were dealt with under PAYE.

This 'grey area' has been the subject of several recent legal and tribunal cases which have examined the status of these individuals. Many of the 'workers' feel that they are unfairly denied basic employment rights and forced into operating in a 'self-employed' model due to tax and other benefits for the 'employers'. The trade unions have taken up the case on behalf of workers.

However, freelancers operate in a similar business model and there have been ongoing concerns that any moves to protect the more 'vulnerable' workers within the gig economy does not adversely impact on the attractiveness of freelancers and consultants to clients.

Gig economy
Th OTS paper explores the possibility of re-creating for the gig economy workers, in the context of self employment, an arrangement that looks and feels more similar to that of an employee from an administrative point of view.

Samantha Hurley, Operations Director at agency group APSCo said: “This is an interesting development as HMRC is currently consulting on off-payroll working in the private sector whether direct or though an intermediary and I imagine that the OTS report will feed into this.

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"While a withholding tax was suggested as an option in a previous consultation, HMRC has ruled this out telling us that they feel that a system of withholding tax from everyone and then expecting those who were genuinely self-employed to claim back wrongly paid tax, would be inherently unfair.

"This new OTS recommendation is, of course slightly different in that it suggests withholding tax from workers who are, in fact, determined as self-employed. Consequently, it is likely that the end client would need to undertake a status determination.

“HMRC’s preferred option is to roll out the current public sector off payroll rules into the private sector in which case the status of all payroll workers would need to be determined by the end client and appropriate taxes deducted.

"Whether a worker could then opt in to a withholding tax if found outside IR35 is an interesting idea as arguably it could help workers who struggle with the fiscal management and compliance requirements of being self-employed.”